Category: Fund

Capital Group CEO explains how to earn better return on investment

Chairman and chief executive officer of the Capital Group.Tim Armour, thinks Warren Buffet is right… and wrong. Buffet bet $1 million for charity that he can earn more in one year investing in a S&P 500 passive index fund. Armour agrees that he probably will beat out the hedge funds this year, but says the method isn’t solid over the long-term.

Armour finds many of the current crop of hedge funds expensive and mediocre. He suggests “low-cost, simple investments” purchased and kept for a long-term investment. He concurs with Buffet’s standard approach of bottom-up investing which requires rigorous analysis of potential companies and constructing a “durable portfolio to learn more: click here.

For those tempted to follow Buffet’s example, Armour offers the following advice.

• The labels “active versus passive” refer to an industry argument. Armour says to look for funds that deliver well over the long-term and keep costs low.
• Index funds don’t protect investors fund from market downturns. They are just as volatile as other investment methods.
• A $10,000 investment 40 years ago in any of the top five active funds American Funds (The Growth Fund of America, AMCAP, Washington Mutual Investors Fund, The Investment Company of America or American Mutual Fund) would have netted an investor more than if they invested the same amount in the first S&P 500 index fund.

The now CEO still performs his duties  equity portfolio manager. Armour worked his way up at the Capital Group, starting there 34 years ago as a participant in The Associates Program after earning his BA in economics from Middlebury College. His specialty in equity analysis is global telecommunications and US service companies.

Armour councils investors to look for funds with high manager ownership and low expenses. Doing so over the long-term nets the best return.